Advantage comes to a halt in merger talks

A planned merger between Advantage Group and Australia's LibertyOne Holdings is understood to have folded this week after secret discussions broke down.

A source from inside Advantage said the company, in which entrepreneur Eric Watson has a cornerstone stake, pulled the plug on the deal because of concerns about LibertyOne's deteriorating fin-
ancial position and plunging share price.

A casualty of April's tech-stock meltdown, LibertyOne's share price has dived from a year high of $A2.70 to a low of about A20c. The company's cash burn rate is believed to be about $A1.7 million a month and grave concerns have been expressed on Australian investor websites about its future.

Advantage and LibertyOne are the oldest net companies here and in Australia.

A merger would give Advantage a much wanted position on the Australian Stock Exchange as well as a possible future Nasdaq listing.

Speaking from Sydney, Advantage chief executive Greg Cross said rumours of a breakdown in merger talks were "not correct" and he did not discount dealings with LibertyOne.

"I've had discussions with a number of web services companies over here as I've made very clear that's what we're looking to acquire."

When LibertyOne's public affairs manager Chris Muldoon was asked if his company had been involved in talks with Advantage he said: "I don't know how I'm going to answer that. I'll have to call you back."

Some hours later: "LibertyOne consistently holds talks with internet-related businesses throughout Asia about a whole range of issues and opportunities but we don't reveal with whom we've had discussions."

LibertyOne has a market capitalisation of about $A70 million, seemingly too expensive for Advantage to acquire.

The company's shareholders approved an issue of 12 million new shares at a special meeting last Friday, raising $36 million, but analysts said Advantage was in no financial state to raise further debt for such a purchase.

The presence in Auckland last week of ex-LibertyOne chief executive, now Advantage executive director, David de Campo, added fuel to the merger speculation.

If the deal is scrapped it will not be the first Watson-backed company to call off merger talks in recent weeks.

Local e-retailer Flying Pig scrapped a planned merger with Australia's TheSpot.com over similar concerns about that company's financial viability. It was then reported TheSpot.com only had sufficient funds for a month in business. Soon after Flying Pig sacked 20 staff, about half its workforce.

This week upmarket retailer David Jones bought the assets of TheSpot for an undisclosed sum.

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